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Last Updated: Dec 12, 2008 - 4:54:39 PM |
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For those who thrive on adversity and find opportunity where others see despair, the past few weeks have possibly been a time of excitement. For the rest of us, particularly for those hoping to retire soon, the economic roller coaster ride has been stomach-churning and worrisome. The economy, the true source of American might, has suddenly become less of a bedrock and more of a trampoline in the minds of many. In the process, the stock market gyrations on Wall Street have extended past Main Street to hit Elm Street, effecting everything from consumer credit to 401K plans for retirement.
As some in Europe gleefully proclaim the end of American financial dominance, people here at home worry about their jobs and their future. Across the nation, banks are failing and businesses are shuttering. Should we be afraid?
Any college-level macroeconomics professor could tell you that the U.S. economy is in a constant state of flux - the only constant is change. Invariably, the pendulum will always swing back - and today it seems, after years of economic expansion, it is swinging back with a vengeance. By the end of last week, the New York Stock exchange suffered it’s worst week in history, falling at a dizzying pace to lose 2,400 points. Meanwhile, banks are increasingly unwilling to loan money to other banks, which are increasingly unwilling to loan money to consumers. As the layoffs at Whirlpool in Middle Amana painfully demonstrate, the stories in the headlines do hit home. Clearly, what happens on Wall Street does impact Washington Street in East Iowa.
But as the nation declines into what almost every economist is now referring to as a recession, will Iowa be sucked into the abyss as well?
Not so much, it seems.
By and large, the local banks found in small towns across East Iowa never gambled with the low-end mortgages, known as sub-prime mortgages, that are currently receiving much of the blame for financial crisis. The small, local banks do their business locally - providing mortgages on property they know and understand, and to customers they meet personally. Outside appraisals mean less than their own knowledge of the market. It turns out that while the big banks struggle and look to the taxpayers for a bailout, the local banks are still doing business much the same as they always have - personally, professionally and responsibly.
And while the headlines are often enough to make many adults lose sleep, the reality is that while indeed millions of homes are being lost to foreclosure, many, many millions more are either completely up to date on mortgage payments or simply have no mortgage at all. While the repercussions of the national real estate bubble have been felt in East Iowa, there was no bubble here. Except for those homeowners in need of selling their homes quickly, or those hoping to cash in on equity, there is no real impact of the declining real estate market or the credit crisis. For most homeowners, there has been no money lost - home valuations exist only on paper, after all.
As for the stock market, however, the players are not limited to the financial towers of Lower Manhattan - most Americans have some involvement in the market through retirement plans, and losses, even paper losses, have an impact.
“A lot of people have 401K plans, which means a lot of people are invested in the stock market and in the last two or three weeks they have lost 25 or 30 percent of the money they had for retirement,” said Fred Stiefel, attorney and Victor City Clerk. “But investments always go up and down. People have the right to be concerned about the safety of their money but in the stock market, that is always the case. We get used to things going up and up and up but we forget, like in the early 80s, things go down, too.”
But as the pendulum swings back, it will also again swing forth. Certainly some of the glee held by European prognosticators darkened when the world waited - and responded to - Monday’s 936 point surge on the New York Stock Exchange. Despite predictions to the contrary, the United States of America still leads the world - through good times and bad. The volatility continues and the world follows.
“I am optimistic about the future, but then I'm an optimist,” Stiefel said. “That doesn't mean that people won't suffer and that people won't lose out. I know that some people will lose their homes and their jobs but in the end, America is strong - Iowa is strong and Victor is strong. Victor has been here 135 years or so, I don't think it’s going to go anywhere.”
Indeed, Iowa is strong, currently riding a boom in the global agricultural market. While the state recently revised growth estimates downward for next year - from 1.8 percent to 1.2 - consider even that growth is the envy of many other states - some of which are experiencing and forecasting declines. And while the current financial crisis involves billions and billions of dollars in losses on paper, Iowa’s strength lies in producing tangible products - the companies in this state actually make things that translate into real wealth, both in agriculture and in the industrial facilities found in small towns across the state.
A long memory and a strong commitment to community also play a part in Iowa’s ability to buck the economic decline. In January, when Victor Plastics filed for bankruptcy, it appeared as though hundreds of jobs would be lost. Volunteers from the Victor Community Development Association and local elected officials took action to pave the way for a new company, River Bend Industries, to acquire the plant. Today, the jobs are still in place and the company sees a promising future.
“Overall, things are going really good for River Bend,” said Iowa General Manager Bill Collins. “The community of Victor has been very supportive and we are pleased that we are doing business in Victor.”
Each week, Stiefel presents words from the past through Victor Memories in the East Iowa Herald. Some of the memories are funny, others are poignant but there is an odd omission:
“It’s interesting that in the Victor Memories, there is no mention of the Depression in the city council minutes from the late 20s and 30s,” Stiefel said. “Not that anyone would have depression news in the minutes but you’d think there would still be comments about not being able to do this or that project. Instead, life just carried on.”
There is an old saying that the definition of a recession is when your neighbor loses his job. The definition of a depression is when you lose yours. Clearly for some, the times are truly rough and that cannot be minimized - but for most people in East Iowa, the paychecks will continue to come as expected, mortgage payments will still be made and the future still looks promising. Tomorrow Fred Stiefel will go to work as he did before most people had ever heard of sub-prime mortgages, Lorne Koenig will still open Marengo Farm & Home and cars will still be purchased at Capper Auto Center and at Shaull & Ullerich. Kinze will continue to lead the way in agricultural product innovation and certainly somewhere in Victor, Marengo, Williamsburg or Ladora, someone is planting the seeds of yet another business or industry that will change East Iowa for the better.
Life, it seems, does indeed carry on.
© Copyright 2008 by The East Iowa Herald
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